Andrew Dennis
What Is the AARRR Pirate Metrics Framework?
- Published:
- Updated: October 23, 2024
Startups tend to obsess over vanity metrics like funding, social media likes and shares, headcount, signups, registered trademarks or patents, and PR.
All of those sound good on a pitch deck, but from an operational perspective, they’re effectively useless: they’re not actionable since they often don’t directly impact your company’s health.
If you need evidence to back that up, consider that:
- Theranos raised $724M over 12 years without ever bringing a product to market;
- One-click checkout startup Fast grew to 450 employees within 3 years with a little over $600K in ARR before shutting down;
- Clubhouse saw over 10 million monthly downloads and was valued at $4B, at its peak, and
- Quibi’s overhyped press coverage made it seem like it’d revolutionize short-form video content.
It didn’t; all the aforementioned companies are effectively dead now. And nobody cares about the Uber, Microsoft, Salesforce logos on your website—every startup does it anyway, whether it’s just one employee from the aforementioned companies using their product for a side project.
Vanity metrics are a great ego trip and can feel like well-deserved validation after all the long nights spent working on your company, especially if you’re part of the founding team.
But, they’re not actionable and don’t present a healthy picture of your company’s growth, financial health, and long-term prospects and are more likely to distract you with noise vs. signal. That’s where AARRR pirate metrics come in: they’re incisive and actionable and they strip away the chaff so you can determine:
- If and how much your company is growing,
- The growth blockers you might be facing (and how to resolve them), and
- How to supercharge growth by focusing on variables that move the needle.
What Is the AARRR Pirate Metrics Framework?
The AARRR pirate metrics framework refers to five user behavior metrics that product-led businesses need to track: acquisition, activation, retention, referral, and revenue.
This framework was created to ensure companies focus on actionable metrics to properly track growth and financial health.
What are AARRR Pirate Metrics?
If “AARRR pirate metrics” sounds like a concept a bunch of programmers/startup geeks came up with over a weekend hackathon, that’s because it probably was. It also sounds like a pirate’s war cry (Ahoy, matey!), hence the pirate metrics designation.
The AARRR Pirate Metrics framework refers to five actionable user behavior metrics startups and product-led businesses should track, namely: Acquisition, Activation, Retention, Referral, and Revenue.
- Acquisition: What channels are (majority of) our users coming from?
- Activation: What percentage of our new users/signups experience an ”aha!” moment?
- Retention: How many of our initial signups tend to stick with our product?
- Referral: Do our users like our product enough to share it with >1 of their friends?
- Revenue: Are users willing to pay for our product? How much? And how does pricing affect our customer churn rate?
Why Was AARRR Created?
The essence of the AARRR frameworks is that it’s easy to get carried away by vanity metrics—they’re usually larger, grow faster, and attract glowing admiration from your industry peers when you post a monthly update on Twitter and LinkedIn. But, they’re usually an extremely poor measure of growth and financial health since none of those metrics are a proxy for sustainable growth, increasing revenues, or customer mindshare.
500 Startups founder and VC Dave McClure (also: PayPal, Founders Fund, etc.) came up with the AARRR framework to help startups/product marketing/growth teams:
- Focus on hard, actionable metrics in an era of easy money (We raised a $100M Series A with $1M ARR!).
- Measure product’s stickiness reliably and channel their marketing and growth budget to high-ROI channels.
- Build effective user onboarding experience that drive digital adoption.
- Convert mindshare into revenue by judging your customers’ willingness to pay.
How Does the AARRR Pirate Metrics Framework Work?
In this section, we’ll break down each of the planks that make up the AARRR pirate metrics framework to understand its relevance to growth-stage companies, the metrics to track them by, and how to optimize them as your company scales up.
1. Acquisition
Within the AARRR Pirate Framework, measuring and tracking acquisition answers the question, “How are we bringing in (most of our) customers?” That data helps you determine where your most-engaged high-value customers come from and why so you can double down on it and allocate your marketing/growth budget accordingly.
Depending on your company’s size and industry, your acquisition channels might include:
- Outbound outreach via email, LinkedIn, cold calling, SMS.
- Content marketing, i.e., via search-optimized blog posts, YouTube videos, etc.
- Brand partnerships, referral campaigns, influencer shout-outs, etc.
- Communities like Hacker News, Indie Hackers, Facebook groups, Slack channels, etc.
- Paid ads on Facebook, Twitter, Reddit, Yelp, etc.
- Word-of-mouth.
Some of the metrics you can use to measure the effectiveness of your acquisition channels include:
- Page visits, unique visits, referral traffic, etc. (for SEO, brand partnerships, social media platforms, influencers, etc.).
- Open rate, click-through rate, conversions (email marketing).
- Cost per click (CPC), Cost Per Mile (CPM), clickthrough rate (paid ads).
2. Activation
This refers to users exploring your product, engaging with content, trying out features, and navigating the UI, preferably until they can hit an aha moment. Depending on your product, the actions can signal engagement, showing that a user is getting value out of a product:
- Using a specific (or several), high-value.
- Completing the onboarding process.
- Upgrading to a paid tier in order to use a particular feature.
- Reading FAQ pages, product documentation, or help articles.
Custom events and metrics like time-to-value, feature adoption rate, onboarding completion rate, upgrades, and process completions are good measures for activation, especially when they’re combined and used in tandem.
3. Retention
Retention figures show a breakdown of your users to help you understand how many keep using your product after their initial signup.
Metrics like customer retention, user retention, customer churn rate, daily, weekly, and monthly active usage (i.e., DAU, WAU, and MAU), customer satisfaction score, and your Net Promoter Score can help understand how much of your customers churn/keep using your product, you can extrapolate that trend into the future, and make adjustments to your growth strategy.
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4. Referral
If your customers get enough value out of your product, they’ll share it with their family and friends, often without any compensation. Likewise, also set up brand partnerships and referral campaigns that compensate users and third-party for every paying customer they bring you.
That’s what the Referral angle in the AARRR Pirate Metrics framework tries to measure: how many of our (paying) users find (and start using) our product as a result of a recommendation from another satisfied user? Metrics like your referral code redemption rate, customer advocacy index, Net Promoter Score, referred signups, conversions, and click-throughs are all indirect signals that measure the quality of your product experience through the willingness of users to evangelize your product to their network.
5. Revenue
Ultimately, your company’s goal is to build a product so good that customers pay for it in increasing numbers— even if you’re a VC-funded startup, you can’t afford to lose money infinitely. Since it’s so easy to get carried away with superficial signals like a growing user base, new product/feature launches, and raising more venture capital, revenue metrics help you determine whether your users find enough value (and how much) in your product to keep paying for it.
Revenue metrics like Average Revenue Per User, Monthly Recurring Revenue, and Gross Revenue Retention Rate helps product/growth teams to:
- Model a path to monetization or profitability.
- Determine which products or features to prioritize, sideline, or shut down.
- Segment users and understand what characteristics high-value customers share.
- Estimate your customer lifetime value and hedge your acquisition, marketing, and growth budgets accordingly.
- Price their products or services appropriately and balance value and cost to maximize revenue.
- Project their financial performance into the future to determine what’s working and what to adjust for better outcomes.
AARRR vs RARRA
The AARRR and RARRA frameworks are essentially identical, except that the pillars (retention, acquisition, etc.) have been scrambled in the second for a more practical approach. As a result, the RARRA framework prioritizes growth metrics as shown:
- Retention: It costs 5x more to acquire new customers vs. retaining existing ones, hence the emphasis.
- Activation: Reduces churn significantly and converts your acquisition pipeline to revenue.
- Referral: Turns existing customers into raving fans and brand evangelists that spread the word.
- Revenue: Helps you keep tabs on your business model and ensure you’re converting usage, growth, etc., into enough money to stay a viable business.
- Acquisition: The final stage of the RARRA framework is acquisition, which focuses on bringing in new users once the other stages are in place.
So, instead of comparing the AARRR/RARRA frameworks, it’s more helpful to think of the first as a theoretical guide to understanding the concept, while the latter serves as a practical framework for prioritizing growth in a startup.
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Limitations of the AARRR Framework
What are some of the limitations of the AARRR framework to keep in mind?
- Sequential Emphasis: AARRR implies a linear progression from acquisition to revenue, suggesting that one stage should be completed before moving on to the next. In reality, these stages can overlap or occur in a different order, especially in more complex customer journeys.
- Overemphasis on Acquisition: The AARRR framework’s emphasis on acquisition can blindside businesses into ignoring retention, adoption, and customer success efforts. In some cases, it may be more cost-effective to improve retention than to acquire new users.
- Neglects Qualitative Data: AARRR primarily focuses on quantitative metrics that measure volume and works to lever them upwards. It may not adequately address qualitative aspects, such as customer feedback, user experience, and brand perception, which can significantly impact growth. And that approach can offer you gains in one angle while hurting another: for instance, if a startup over-prioritizes acquiring new customers, they might end up with unqualified, poor-fit customers that have an unusually high churn rate.
- Unsuited for Orthodox Business Models: AARRR is primarily designed for SaaS (Software as a Service) and subscription-based businesses and doesn’t fit in with the challenges of business models like e-commerce or physical retail.
Analyze your UX, create experiences, and engage your customers with Whatfix’s in-app guidance, self-help support, and product analytics
Whether you’re a startup founder building a company designed to grow fast, a product manager trying to gain traction on a newly released feature, or even an enterprise-scale company trying to focus on actionable metrics, Whatfix can help.
Our platform offers product-led companies a full-stack growth machine for:
- Product analytics: Figure out how your users interact with your product with tell-all heatmaps, session replays, and user journey analyses.
- Self-help: Embed help widgets in your product’s UI so users can search through help articles, pre-recorded demos, product documentation, and wikis from one source of truth
- In-app guidance: Educate users with interactive walkthroughs, UI/UX aids like hotspots, tooltips, alerts, and beacons, product tours, and onboarding checklists.
Dive deeper with more Customer Growth & Retention content.
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What Is Whatfix?
Whatfix is a digital adoption platform that provides organizations with a no-code editor to create in-app guidance on any application that looks 100% native. With Whatfix, create interactive walkthroughs, product tours, task lists, smart tips, field validation, self-help wikis, hotspots, and more. Understand how users are engaging with your applications with advanced product analytics.
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